Excise duty at export stage upheld for Indian made foreign liquor, but not for rectified spirit

Rectified spirit was treated as outside "alcoholic liquor for human consumption" in Entry 51 of List II, so the State lacked competence to levy export duty on it; the article notes that this levy was therefore invalid. For Indian made foreign liquor other than rectified spirit, the duty described as export duty was treated as excise duty collected at the export stage for administrative convenience under the U.P. excise scheme, and was regarded as authorised by the Constitution and the Act. The levy was also said not to directly or immediately impede trade, so it did not offend Article 301. The discussion concludes that only the challenge to rectified spirit succeeded.

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Issues: (i) Whether export duty could validly be levied on rectified spirit exported from Uttar Pradesh. (ii) Whether export duty on Indian made foreign liquors was authorised by the Constitution and the U.P. Excise Act and whether it offended Article 301 of the Constitution.

Issue (i): Whether export duty could validly be levied on rectified spirit exported from Uttar Pradesh.

Analysis: Rectified spirit was held to be outside the expression "alcoholic liquor for human consumption" in Entry 51 of List II of the Seventh Schedule. The State's power under that entry extended only to liquor fit for human consumption, and not to spirit which remained unfit for such consumption merely because some persons misused it. The earlier view that the State lacked competence to levy excise duty on rectified spirit was followed.

Conclusion: The levy of export duty on rectified spirit was incompetent and invalid, and the petitioners succeeded on this issue.

Issue (ii): Whether export duty on Indian made foreign liquors was authorised by the Constitution and the U.P. Excise Act and whether it offended Article 301 of the Constitution.

Analysis: The levy described as export duty was treated as excise duty on manufacture of liquor, collected at the stage of export for administrative convenience. Under the Act and the Rules, duty could be imposed on excisable articles manufactured in the State and exported under the statutory scheme governing passes, permits, bonds, prepayment and adjustment of duty. The Court held that only export duty was being collected on such liquor, not a double levy of still head duty and export duty. The inter-State arrangement regarding adjustment of duty did not curtail the State's legislative competence. The levy was also held not to directly or immediately impede the free flow of trade so as to offend Article 301.

Conclusion: The levy of export duty on Indian made foreign liquors, other than rectified spirit, was upheld as valid and not violative of Article 301.

Final Conclusion: The petitions succeeded only to the limited extent of challenging export duty on rectified spirit, and otherwise failed; the impugned levy on other liquors was sustained.

Ratio Decidendi: A State may levy excise duty on liquor manufactured within the State at a convenient stage of collection, including export, provided the impost remains referable to liquor fit for human consumption and does not directly and immediately restrict trade within the meaning of Article 301.

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